A place for a tired old woman to try to figure things out so that the world makes a bit of sense.

Friday, July 25, 2008

Well, Duh

Who could have imagined? Pharmaceutical companies made huge profits under Medicare Part D. With no price controls allowed under the program, PHARMA's members made billions of dollars more than they would have if the same type of controls existed under this plan as exist under Medicaid, according to this article in today's Los Angeles Times.

U.S. drug manufacturers are reaping a windfall from taxpayers because Medicare's privately administered prescription drug benefit program pays more than other government programs for the same medicines, a House committee charged in a report Thursday.

The House Committee on Oversight and Government Reform found that taxpayers are paying up to 30% more for prescription drugs under Medicare's privatized Part D program for seniors and the disabled than under the government's Medicaid program for the poor. ...

"Medicare Part D has given the major drug companies a taxpayer-funded windfall worth billions of dollars," said committee Chairman Henry A. Waxman (D-Beverly Hills). ...

Under Medicaid, drug companies have to sell prescription drugs to the government at discounted prices. When Medicare Part D was enacted in January 2006, drug companies were no longer obliged to cut rates for their products.

In the two years Medicare Part D has been in effect, drug manufacturers have taken in $3.7 billion more than they would have through prices under the Medicaid program, committee investigators found.

"The drug companies are making the same drugs. They are being used by the same beneficiaries. Yet because the drugs are being bought through Medicare Part D instead of Medicaid, the prices paid by the taxpayers have ballooned by billions of dollars," Waxman said. [Emphasis added]

How unsurprising. Equally as unsurprising has been the PHARMA response to this news:

Richard Smith, a vice president with the Pharmaceutical Research and Manufacturers of America, the leading drug industry group, warned in a statement to the committee against government interference in Medicare Part D.

"It is primarily the effective operation of the competitive market that has driven down Part D costs for beneficiaries and taxpayers compared to previous estimates," Smith said.

In other words, the pharmaceuticals aren't making as much as they thought they would when they lobbied successfully to foreclose any government negotiation on prices under the plan.

Congressman Waxman has promised to fix the pricing problem. While he's at it, he might want to look at the other flaws in this deeply flawed plan, like the donut hole that exists for elders on expensive medications after a certain threshold is reached.

3 Comments:

Actually, big pharma is in alot of trouble. Their pipelines are largely empty, and most of the big ones have been laying off talent, often in R&D. Chances are, those windfall profits will not be plowed into R&D; they'll either go into management compensation or into buying small start-ups whose technmologies seem attractive, but which they ultimately will not understand. These companies are suffering under the greedy, short-sighted business models which produced their huge sizes, but the public is not well served by these business models which unnecessarily foist amphetamines on children while ignoring the 'orphan' disoerders for which there is not sufficient 'market' to justify R&D expenses. Fuck them (and my wife works for a small pharma).